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Business Reporter
LISTED roofing and building products manufacturer, Turnall Holdings Limited’s revenue for the half year ended June 2014 went down 32 percent mainly due to erratic raw material supplies precipitated by cash flow constraints biting the company.
Revenue for the period went down to about $13 million from about $19 million with exports contributing about $0,37 million which is 2 percent of the company’s turnover.

“The drop in revenue was precipitated by construction activities being driven by the low paying residential sector coupled by low investment appetite for commercial projects.

“Constrained funding for public projects and limited, short term and availability of expensive funding (mortgage) continue to be challenges that affected the company’s operations,” said Turnall Holdings finance director Mr Kenias Horonga.

The company lost a cumulative whole month’s production leading to low capacity utilisation due to fibre outage.

Capacity utilisation for the company averaged 45 percent and unavailability of raw materials increased cost of production and reduced margins.

Volumes of local building products performed 4 percent above budget while exports of non-asbestos cement products were 69 percent below budget.

Gross profit margin for the company was sitting at 6,77 percent compared to 22 percent recorded in the previous period.

The company adopted a new business model at the beginning of the year which has so far been successful in reducing investment in net working capital by about $5 million during the six months ended June 2014.

Change in the business model meant the company had to move from being predominantly credit model to cash or near cash. Total assets went down to about $63 million for the period under review from $70 million of the comparative period last year.

An operating loss of $2,6 million for the company was achieved mainly due to low capacity utilisation with fixed overheads being spread over a thin production level.

Net finance costs were sitting at $0,89 million while loss before tax was at $3,52 million. Net interest expense came down from $1 million to $895,853 due reduction in borrowings as the company paid off the PTA Bank loan amounting to $5 million.

Working capital management strategy employed by the company resulted in reduction in debtors and borrowings.

Mr Horonga said the operating environment was characterised by receding aggregate demand due to a myriad of reasons, chief among them being the liquidity crunch which continued unabated.

“The main focus for the company was therefore centred on working capital management and this called for a change in the business model from one predominantly credit based to one which is predominantly  cash based,” he said.

Mr Horonga said the company’s business plan was also affected by delays in a number of pipe projects that had been lined up by Government for both sewer and water reticulation due to funding constraints.